Business Judgment Rule Assignment
February 19th, 2020
- Green Corporation has had its eye on Black Corporation for some time with thoughts of acquiring Black. Seeing that the price of Black’s stock was down to $37 a share, the CEO of Green, Mr. Jones, approached the CEO of Black, Mr. Smith, over dinner and said that Green would acquire Black for $55 per share, an obvious high premium over the current stock price. Smith immediately told Jones that Smith thought the offer was more than fair, and that he would recommend that his Board of Directors accept the offer and recommend that its shareholders do the same. Smith, without doing any detailed research into the actual valuation of his company, or asking Jones what Jones based the $55 offer price on, did as he promised. After some discussion with his Board, the Board in fact did approve the sale. Some of the shareholders of Black Corporation were upset over the deal, and claimed that the price of $55 was only about 60 percent of what the company was really worth.
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- Analyze Mr. Jones’ behavior based on the business judgment rule.
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- What options for the stockholders of Green Corporation have about the sale of the company to Black Corporation? Get Finance homework help today
